Central excise duty on pre-budget stock cannot arise after valid clearance at nil rate; later godown removal is irrelevant.

Central excise duty could not be demanded on pre-budget stock of branded garments lying in the assessee's godown where the goods had been manufactured by job workers and cleared at the nil rate prevailing on the relevant date. The goods were supplied in ready-packed condition under the assessee's brand name, and the levy could not be shifted to the later date of removal from the godown merely because exemption was withdrawn after clearance. Reliance on Rule 9A of the Central Excise Rules, 1944 was incorrect because the rule had already been deleted, and duty liability could not be fixed on a removal-based theory once the goods had been validly cleared at the applicable nil rate.

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Issues: Whether central excise duty could be demanded on pre-budget stock of branded garments lying in the assessee's godown when the goods had been manufactured and cleared by job workers at the nil rate prevailing on the relevant date.

Analysis: The entries in the assessee's letter and the show cause notice supported the position that the garments were manufactured by job workers under the assessee's brand name and were supplied in ready-packed condition without further processing by the assessee. The levy could not be shifted to the later date of removal from the godown merely because the goods remained in stock when the exemption was withdrawn. The reliance on Rule 9A of the Central Excise Rules, 1944 was misplaced because that rule had already been deleted, and duty liability could not be fastened on the basis of removal when the goods had already been cleared on the nil rate then applicable.

Conclusion: The demand of duty, interest, and penalty was unsustainable and the assessee succeeded on this issue.

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